# How Altria makes money

CXProWealth Business Lens · Altria (MO) · Q3 FY2026

Read from the 10-Q for the period 2026-07-01 to 2026-09-30, filed 2026-10-29 with the SEC (accession 0000764180-26-000114): https://www.sec.gov/Archives/edgar/data/764180/000076418026000114/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $6.1B (+1.0% on the year)
- Operating income: $3.3B (operating margin 54.0%)
- Net income: $2.5B (net margin 41.1%)
- Gross margin: 64.3%
- Free cash flow: $3.0B (48.9% of revenue)
- Cash conversion (operating cash flow / net income): 1.23x
- Capital expenditure: 1.8% of revenue

## Where the money goes (Q3 FY2026)

- Smokeable Products Segment → Net revenues: $5.4B
- Oral Tobacco Segment → Net revenues: $688.0M
- All Other → Net revenues: $12.0M
- Net revenues → Excise taxes on products: $691.0M
- Net revenues → Cost of sales: $1.5B
- Net revenues → Gross profit: $3.9B
- Gross profit → Marketing, administration and research costs: $625.0M
- Gross profit → Exit costs: $3.0M
- Gross profit → Operating income: $3.3B
- Operating income → Interest and other debt expense, net: $270.0M
- Operating income → Earnings before income taxes: $3.0B
- (Income) losses from investments in equity securities → Earnings before income taxes: $242.0M
- Net periodic benefit income, excluding service cost → Earnings before income taxes: $5.0M
- Earnings before income taxes → Provision for income taxes: $776.0M
- Earnings before income taxes → Net earnings: $2.5B
- Net earnings → Net earnings attributable to Altria: $2.5B
- Net losses attributable to noncontrolling interest → Net earnings attributable to Altria: $4.0M

## Where the revenue comes from

### Segments (Segment Reporting (Segment Data Schedule) (Details))

| Member | Value | Share |
|---|---:|---:|
| Smokeable Products Segment | $5.4B | 88.6% |
| Oral Tobacco Segment | $688.0M | 11.2% |
| All Other | $12.0M | 0.2% |

The members sum to total revenue.

## Key insights

### Cigarettes pay for everything else Altria does

One segment earns nearly all operating profit and covers the losses of the smoke-free bets outside pouches.

Smokeable Products, Marlboro cigarettes and Black & Mild cigars, earned $3.05B of segment operating income, 92.2% of the company's $3.31B operating income. Oral Tobacco earned $434M, 13.1% of operating income. The All Other category, which holds the NJOY e-vapor business and the Horizon heated tobacco venture, lost $88M. The segment shares add to more than the whole because All Other losses, corporate expenses and amortization of intangibles are subtracted after the segments. _(from the filing)_
Profit is more concentrated than revenue, where Smokeable Products brought in 88.58% of net revenues and Oral Tobacco 11.22%. Oral Tobacco in fact keeps more of each revenue dollar as segment operating income, 63.1% against 56.2% for cigarettes. Cigarettes dominate profit because they dominate sales and because the All Other losses come off the total. _(from the filing)_
Analysis: the company's stated aim is to move beyond smoking, but this quarter the funding runs the other way. Cigarette profit pays for NJOY, the Horizon venture and research on new platforms, as well as the dividend. Until the smoke-free lines earn on their own, the pace of cigarette decline sets how long that funding lasts. _(analysis)_

### Tax refunds, not sales, lifted gross profit

Excise taxes fell by about as much as gross profit rose, so the margin gain came from the tax line.

Gross profit rose 3.38% to $3.94B from $3.81B, and gross margin rose 1.49 points to 64.27%. Over the same period excise taxes fell to $691M from $821M, a drop about the size of the whole gross profit gain, while cost of sales rose 4.24% to $1.5B. The filing attributes the excise decline primarily to "higher refunds of taxes and duties paid on imported cigarettes" and lower shipment volume, and the cost rise to higher manufacturing costs and the USSTC facilities consolidation. _(from the filing)_
Duty drawback lets a manufacturer recover certain duties, taxes and fees paid on imported tobacco products when offsetting volumes are later exported. The filing lists changes to that rule, or challenges to the company's position on it, among the factors that could raise the taxes and fees it pays. _(from the filing)_
Analysis: the filing also reports much higher contract-manufactured export cigarette volume and a new credit line for a contract manufacturing customer. It does not say these drive the refunds, so the link is a reading, not a stated fact. Either way, the refund line can move for reasons unrelated to smokers, and it is worth separating from the price and volume story when reading later quarters. _(analysis)_

### Fewer cigarettes shipped, yet cigarette revenue still grew

Price rises outran falling volume, but more of the packs Altria sells are now its own discount brands.

Smokeable Products revenue rose 0.84% to $5.43B while reported domestic cigarette shipment volume fell 2.9%. The filing credits higher pricing, "which includes higher promotional investments", partly offset by lower volume and a higher share of discount cigarettes in the mix. _(from the filing)_
Marlboro's retail share of all cigarettes fell to 39.5% from 40.5%, while Altria's total cigarette share rose to 45.7% from 45.4%. The industry's discount share reached 34.1% of the category, which the filing attributes to "continued discretionary income pressures on adult nicotine consumers". The company's own discount brands are L&M and Basic. _(from the filing)_
Analysis: trading down inside the company keeps the smoker, but at a lower price per pack. With total share holding while Marlboro slips, the mix cost grows with each switch, so segment revenue growth would rely ever more on list price rises staying ahead of both falling volume and the move to discount. _(analysis)_

### The beer stake grew earnings faster than tobacco did

Income from the ABI stake more than doubled, so net earnings grew faster than operating income.

Income from investments in equity securities was $242M, against $107M a year earlier, which the filing attributes primarily to higher income from the equity investment in ABI, the world's largest brewer, including favorable special items. Operating income rose 2.57% to $3.31B, while earnings before income taxes rose 6.99% to $3.29B and net earnings attributable to Altria rose 6.02% to $2.52B. Diluted EPS was $1.51 against $1.41. _(from the filing)_
Investment income equalled 7.4% of pre-tax earnings. Part of the gain was absorbed by a 10.86% rise in the tax provision to $776M, which the filing attributes primarily to a prior-year net tax benefit from reserves tied to the ABI investment and to higher pre-tax earnings. _(from the filing)_
Analysis: Altria records its share of ABI's results a quarter late, and the line includes special items such as mark-to-market moves, so it can swing with no change in tobacco. Judging the tobacco business on operating income rather than net earnings avoids crediting it with the brewer's quarter. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of Altria (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what Altria's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Altria 10-Q for the period to 2026-09-30: https://www.sec.gov/Archives/edgar/data/764180/000076418026000114/ (2026-10-29)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03